The recent decision in (1) Travelers Insurance Co Ltd (2) Denton Wilde Sapte v Gauri Advani [2012] concerns the recovery of defence costs from an insured former employee of a firm of solicitors, where the employee's conduct was "plainly dishonest".
Background
The recent decision builds upon the earlier case of Nayyar
& Others v Denton Wilde Sapte & Advani [2010].
That case saw a claim fall foul of the ex turpi causa defence,
namely, the maxim or principle that a claimant cannot rely upon its
own illegal or immoral conduct to recover compensation.
That case involved a claim by purported clients against Dentons
and a senior solicitor in its India Group, a Ms Advani, for an
unreturned "deposit" of £383,259. Ms
Advani's role within Dentons was focused on business
development, rather than fee earning. She introduced the
Claimant travel agents to an opportunity, via a former Tourism
minister for the Indian state of Utter Pradesh, to be the Global
Sales Agents of Air India in the UK and Ireland. Total sums
of £383,259 were paid over (out of a total cost originally
stated to be £2.4m) although, in the event, the agency was
not awarded nor was the money returned. The Claimants sued
Dentons and Ms Advani for the return of the so-called
deposit.
The Judge held that the claim against both Defendants failed on
the basis of the illegality defence. The "deposit"
was intended to be a bribe and it was irrelevant whether this was
successful or not; the moral turpitude of the briber was the
same.
That was the end of the matter, although the Judge went on to find
that Dentons was not, in any event, vicariously liable for the acts
and omissions of Ms Advani. The Claimants were not (and had
never been) clients to the firm and, whilst Ms Advani acted as a
"deal broker", she was not acting within her actual or
ostensible authority; she was acting on her own behalf and,
significantly, had a personal role and stake in the deal, having
sought a commission of £250,000 out of the £2.4m total
cost. To read more about the 2010 decision click here.
The Recent Decision
Dentons' insurer, Travelers, sought recovery from Ms Advani
of a sum exceeding £500,000 which it had paid to fund her
separate defence of the earlier action. Dentons sought from
her that part of its own defence costs which it had been unable to
recover, a sum of approximately £90,000.
Travelers, whose policy covered Dentons' employees, argued
that Ms Advani had acted dishonestly in the transaction and outside
the course of her employment, with the result that it was entitled
to be reimbursed under the terms of the relevant policy.
Dentons argued that the costs which it had incurred were
recoverable from Ms Advani as damages, as she had acted in breach
of her contract of employment in conducting herself in the way she
had.
The recent judgment held that both claims were successful.
Ms Advani knew that the sums in question were going to be paid, and
were paid, as a bribe, and she had been involved in the discussions
which led to the payments. Her role was to be the means of
communication between the former Tourism minister and the travel
agents and to arrange for the bribe to be paid. The Court
found that, whilst the 2010 judgment did not go as far as to
describe Ms Advani's conduct as dishonest, what her conduct was
found to have been in that judgment was "plainly
dishonest". It was a term of Ms Advani's
contract of employment that she should act honestly and it was
wholly foreseeable that, as a result of her dishonesty, Dentons
would be drawn into the original action.
Comment
In this case, the original proceedings went a long way towards
finding dishonesty on the part of the insured employee. It
is, however, usually necessary for insurers to fund a defence and
separately (e.g. through arbitration) seek a declaration in this
respect. This case is a reminder of the potential value of
such recourse, albeit that the individual's personal resources
and ability to satisfy any judgment or award will clearly be a
major factor in any costs vs. benefit assessment.
Further reading:
(1) Travelers Insurance Co Ltd (2)
Denton Wilde Sapte v Gauri Advani [2012] EWHC 623
(QB); [Nayyar & Others v Denton Wilde Sapte
& Advani [2010] PNLR 15
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 29/03/2012.
